They Can’t All Be That Smart
A Due Diligence Framework for Factor Investors

Categories Author: Chris Meredith, Insight, Investing

Not all factor products are smart. This article delineates factor-based strategies — fundamental weighting, smart beta, and Factor Alpha — by showing the differences between them. It also provides a framework1 for determining the alignment between factors and portfolio construction, as well as the fees you should expect to pay.  Continue reading “They Can’t All Be That Smart
A Due Diligence Framework for Factor Investors”

2017 Factor Alpha Newsletter
Small Stocks

Categories Investing, OSAM Research

So far in 2017, investors saw how multi-factor exposure to Value — in concentrated portfolios — can be beneficial in the small cap space.1 This 1Q17 Small Cap2 edition of the Factor Alpha Newsletter (see also: All Stocks & Global Large Cap) compares our proprietary multi-factor themes3 to the Russell 2000® Value Index (R2000V).4

Continue reading “2017 Factor Alpha Newsletter
Small Stocks”

A Factor Investor’s Perspective
on the Economic Cycle

Categories Author: Ehren Stanhope, Investing, Momentum, Quality, Value

diagram

“If you spend more than 13 minutes analyzing economic and market forecasts, you’ve wasted 10 minutes.”

— Peter Lynch

Though unpredictable, the economic cycle has significant implications for investors. Given the vast amount of evidence that certain themes consistently outperform — and underperform — throughout the cycle, an allocation to passive market cap-weighted indexes almost seems naive. Continue reading “A Factor Investor’s Perspective
on the Economic Cycle”

Expensive ETFs —
the P/E Under the Hood

Categories Investing, OSAM Research

“Trump Bump Boosts ‘Smart Beta’ Funds”   — WSJ, Feb. 5, 20171

The chart below helps answer these 2 questions: “Do I really want to rely on a tweet to drive my investing success?” and “Am I (and/or are my clients) in an ETF that selects its stocks for their scalability rather than their potential to generate alpha?”2 Additionally, this article asks “How does a contrarian thesis of ‘building resilient, inexpensive portfolios by selecting quality, high-yielding stocks’ — or something along those multi-thematic lines — look under the lens of P/E?”3 Continue reading “Expensive ETFs —
the P/E Under the Hood”

Factors are Not Commodities
(Part 2 of 2)

Categories Author: Chris Meredith, Investing

(See Part 1 of this article for background info on the importance of accurately constructing factor signals and how they can impact which stocks get selected into the portfolios.)

Alpha Signals

Quantitative managers tend to combine individual factors together into themes like Value, Momentum, and Quality. But there are several ways that managers can combine factors into models for stock selection. And models can get very complicated. Continue reading “Factors are Not Commodities
(Part 2 of 2)”

Factors are Not Commodities
(Part 1 of 2)

Categories Author: Chris Meredith, Investing

“A man with two watches is never sure [what time it is].”
—Segal’s Law excerpt
(see below)

The narrative put forth by “smart beta” products is that factors are becoming an investment commodity. Factors are not commodities — rather, they are unique expressions of investment themes. The uniqueness of one Value strategy from another can lead to very different results, and there are many places that factor-based portfolios can diverge. Continue reading “Factors are Not Commodities
(Part 1 of 2)”

2-Quarters-in-1

Categories Author: Scott Bartone, Investing, U.S.

“Frankly, [4Q16] was almost a story of two quarters in one,” explained TD Ameritrade CEO Tim Hockey a couple days before the inauguration.1 “November 8th was the election; we saw retail investors essentially go on the sidelines up until that date, trading levels were down, and then it just exploded right after that. And, it’s actually carried over into January as well — trading levels are high.”

Indeed, the 2016 Presidential Election saw a surge in equity market returns (and market activity in general, which is where Hockey’s observations come into play2). On the flip side, there was also a reversal for many investment factors and sectors. Continue reading “2-Quarters-in-1”